Last May, I published an article on Bitcoin Magazine where I predicted that the ongoing Ordinals controversy would be resolved by Layer 2 (L2) metaprotocol solutions. Now, with the availability or imminent release of two highly-anticipated L2 solutions, Taproot Assets (TA) and RGB, it is time to revisit this topic. In fact, it may be long overdue, considering the recent surge in fees caused by the renewed interest in BRC-20 tokens.
As I have previously stated, I firmly believe that the advantages of L2 metaprotocol solutions, such as lower fees, higher flexibility, and better pricing, will ultimately outweigh the use of on-chain Ordinals. That is why I have been actively involved in advancing these solutions over the past few months. I have been deeply engaged in both TA and RGB projects, and in September, I established a collaborative group for developers of L2 metaprotocol wallets, exchanges, and projects, as well as other interested parties. I have also traded tokens on the new TA exchanges, "Tiramisu" and "NostrAssets," and named the now-abandoned "Spank" exchange as "TapAss" (a play on the word "Tapa," which is the cryptographic primitive used in RGB, invented by Peter Todd in 2016). Most recently, I have founded the first 10,000-piece profile picture (PFP) art collection on RGB, called "Single-Use-Seal," named after the cryptographic primitive used in RGB.
Given that my involvement in creating the artwork for Seals, marketing the project, and interacting with its exceptional community has been my biggest investment in L2 metaprotocol projects, it is safe to say that I have high hopes for RGB. However, unlike RGB, which is currently undergoing a code audit by Blockstream before being open to user investment, TA is already available as a functional alternative to Ordinals. From personal experience, I can attest that TA tokens and NFTs are working and trading extremely well, with Lightning support as a standard feature. So why, in the current high-fee environment, is the Ordinals war still raging, as evidenced by the recent battle over OCEAN mining pool filtering Ordinals transactions?
Image Inscriptions – Here to Stay?
As an artist (or, more accurately, an amateur cartoonist), I understand that limitations can often spark creativity. A blank page can be intimidating with its endless possibilities, while restrictions can provide structure and a starting point. The size limitations of Inscriptions have not hindered the explosion of creativity, from charming low-resolution and pixel art to improved technical efficiencies, such as recursive inscriptions. However, the tight restrictions on file size imposed by the on-chain format do limit certain possibilities.
For example, Single-Use-Seals explores the role of human artists in a world increasingly dominated by AI. To ensure "Proof-of-Art" verification across the PFP collection and to filter out AI-generated entries from our community contests, Seals relies on high-resolution photographs of handmade art. At a resolution of 3072 by 3072 pixels, it is possible to conduct a CSI-style enhancement of a Seal, sufficient to confirm the irregular pen strokes, imperfections of the paper, and shifting photographic tones as being made by a human.
For a collection of 10,000 pieces, achieving this level of fidelity is cost-prohibitive within Inscriptions – if not technically impossible, given that each Seal image is roughly double the maximum size of a Bitcoin block. The same limitations apply even more so to high-quality audio and video content. However, the high cost of scarce block size is as much a feature as a bug. Being placed within the world’s first, most expensive, and most secure blockchain confers an undeniable prestige. As a result, those with suitably small art or deep pockets will continue to raise the perceived value of their work through direct association with Bitcoin. This will inevitably lead to a situation where data-heavy art (or that produced by the archetypal starving artist) finds its natural place on Layer 2 metaprotocols. Therefore, I still foresee a fee-determined bifurcation of Bitcoin-based art between layers.
BRC-20s - Time to Go!
Whereas image Inscriptions have their place, in my opinion, BRC-20s (and related on-chain tokens) are now obsolete. There are some significant and fundamental drawbacks to these tokens:
BRC-20s are minted on a first-come-first-served-no-refunds (FCFS/FU) basis. If your transaction arrives after all supply has been claimed, your funds are wasted, and you get nothing. This leads to bursts of intense fee competition, which are disruptive to the Bitcoin network and cause much Ordinals backlash.
BRC-20s rely on centralized indexers, primarily run by exchanges, to keep track of who owns what. This creates a high potential for desynchronization and fraud.
BRC-20 transfers and actions require on-chain Bitcoin transactions, which are expensive and relatively slow compared to tokens on other chains.
BRC-20 tokens have limited applications. To my knowledge, the basic functions expected of tokens on other chains, such as any kind of decentralized financial applications, have yet to materialize. Additionally, there are no reputable BRC-20 stablecoins at this time – Stably is not something I would recommend even to a central banker.
- BRC-20s are limited to 4-character tickers, and all the most desirable 4-letter words have already been taken.
Furthermore, as mentioned in point 1, new BRC-20 deployments are constantly under threat from "The Sophon," a rather aggressive piece of code, developed by Rijndael, to hinder the creation of new on-chain tokens. Named after the single-proton supercomputers deployed by aliens in Cixin Liu’s sci-fi trilogy, "Remembrance of Earth’s Past," Bitcoin Sophons scan the mempool for any new BRC-20 activity. Upon detection, Sophons pay for a high-fee transaction intended to front-run the original BRC-20 deployment transaction and set its total supply to 1. This effectively occupies the BRC-20’s intended ticker and invalidates any mint transactions from users, incidentally wasting any of their en-route transactions.
Suffice it to say, I am not the only one who believes that BRC-20s, in a word, suck. However, instead of trying to neutralize them through expensive Sophon transactions or censor them at the miner level, I believe that the best solution is to promote superior alternatives. To that end:
- Image Inscriptions have their place, but BRC-20s are now obsolete.
- The limitations of Inscriptions have not hindered creativity, but they do limit certain possibilities.
- BRC-20s have significant drawbacks, including being minted on a first-come-first-served-no-refunds basis, relying on centralized indexers, requiring on-chain transactions, having limited applications, and being limited to 4-character tickers.
- The Sophon code poses a constant threat to new BRC-20 deployments.
The best solution is to promote superior alternatives, such as L2 metaprotocol solutions like TA and RGB.
</figure> <p>AdamCoin (AC) is the first token deployed on the Tiramisu TA wallet and exchange. AC enjoys a bullish and active market and, like all tokens on Tiramisu, can be traded by both Liquidity Pool and Order Book. Many other tokens and NFTs are available for trading on Tiramisu and the process of creating new ones is cheap and reliable (sans menacing multi-dimensional micro-computers). As an added bonus in these trying high fee times, Tiramisu deposits and withdrawals can be made via Lightning.</p><figure> <img src="https://atradingnews.com/wp-content/uploads/2024/02/1708512907_451_Ordinals-vs-Layer-2-Metaprotocols-Part-2-The-Final-Showdown.png" height="675" width="1200"> </figure> <p>TRICK and TREAT are twin TA tokens trading on the open-source NostrAssets platform. With a Telegram channel of 13,000+ members, trading is brisk indeed and has the added bonus of integration with the Nostr protocol (despite Fiatjaf’s heated objections). Currently NostrAsset’s only real drawback is that it doesn’t allow the minting of new tokens or NFTs.</p><figure> <img src="https://atradingnews.com/wp-content/uploads/2024/02/1708512907_762_Ordinals-vs-Layer-2-Metaprotocols-Part-2-The-Final-Showdown.png" height="275" width="1200"> </figure> <p><a target="_blank" href="https://twitter.com/PepeRgb20" rel="noopener">PePe-RGB</a> is an RGB-based project in the final stages of launch preparations. PePe has already attracted a massive Twitter following of 28,500+ people and enthusiasm runs high for the PePe’s initial stage; the release of the world’s first popular RGB-20 token. There’s a lot more in PePe’s plan however, already there’s a fully-3D animated avatar, the grandson of the ubiquitous memetic frog, cast as the protagonist in a narrative set to play out across a cyberpunk city. It’s even rumored that a certain<a target="_blank" href="https://twitter.com/Single_Use_Seal" rel="noopener"> Seal</a> may guest star... and even release his own token with utility for a verified-human-art market in future!</p><p>So, with such fine L2 tokens available, the question is why anyone still bothers with BRC-20s? As even the most scorchingly laser-eyed Bitcoin Maxi must admit, shitcoins ON Bitcoin are a damn site better than shitcoins IN Bitcoin!</p><h2>Stealthy Stablecoins in the Colourful Dark</h2><p>Speaking of tokens, it's understandable that many Bitcoiners have little interest in them. However, stablecoins are - like it or not - major players in our space. The third largest coin by market cap, Tether, is particularly noteworthy for regularly having the highest daily trading volumes across the market. It seems that fiat and BRC-20 enjoy a similarly persistent demand, despite the existence of vastly superior alternatives... And while a cryptocurrency bound to fiat may be far from the cypherpunk ideal, that doesn't mean it can't be improved. For example, a digital Dollar invisible to chainanalysts and regulators alike (24:30) offers some interesting new possibilities in a world of increasing monetary sanctions and surveillance. Perhaps with such possibilities in mind, Tether's CEO and Bifinex's CTO, Paolo Ardoino, has named RGB as the rightful successor to the stablecoin's original platform, and the best opportunity for issuing stablecoins on BTC.</p><figure> <img src="https://atradingnews.com/wp-content/uploads/2024/02/1708512907_155_Ordinals-vs-Layer-2-Metaprotocols-Part-2-The-Final-Showdown.png" height="800" width="1066"> <figcaption><em>TA forked from RGB, leading to contention between the projects, but both benefit Bitcoin!</em></figcaption> </figure> <p>Indeed, while nothing prevents the issuance of stablecoins on TA, RGB has some technical advantages which make it an ideal platform. Firstly, TA has the constraint of its universe model, in which each asset issuer creates their own unique and separate universe in which their assets operate. While it's possible to bridge universes, this requires permission from the original issuer. For assets intended to trade freely across the web - and stablecoins are surely most useful when easily transferable between various exchanges, wallets, etc. - this structure presents some obvious difficulties and centralization issues. RGB has no such constraints. Any two parties using the RGB system can freely exchange any amount of assets. Additionally, due to RGB's client-side validation model, only those parties would be aware that any such exchange occurred... Might we be looking at "gaining a new territory of freedom for several years," about 15 years after Satoshi's original statement?<br></p><p>The RGB rabbit hole goes a <em>lot</em> deeper, to the extreme future prospect of Prime, whereby Bitcoin itself rebases from its blockchain to a client-side validation model - all achievable on a voluntary basis without any soft or hardfork required. Such a prospect is well beyond the scope of this article, so let's confine ourselves to another exciting feature of RGB - complex smart contracts running on Bitcoin. This opens the door to all the opportunities (and risks) of the DeFi space but hopefully, done privately and in a low-cost, scalable manner atop Bitcoin. While some will have their objections, the prospect of rendering Ethereum and other on-chain smart contract platforms obsolete holds undeniable appeal…</p><figure> <img src="https://atradingnews.com/wp-content/uploads/2024/02/1708512908_249_Ordinals-vs-Layer-2-Metaprotocols-Part-2-The-Final-Showdown.png" height="800" width="1012"> </figure> <h2>Conclusion: Layer 2 is Bullish for Bitcoin</h2><p>As the next Bitcoin bull market gets underway, Bitcoiners have the opportunity to make Layer 2 metaprotocol solutions part of the narrative. By failing to do so, more attention will flow to familiar, flawed options like BRC-20s, which will exacerbate the fee pressures usual to hot Bitcoin markets. Even for Bitcoiners without any interest in the possibilities and prospects of L2 metaprotocol assets, understanding and promoting them is a good way to support Bitcoin's next growth phase.</p><figure> <img src="https://atradingnews.com/wp-content/uploads/2024/02/1708512908_819_Ordinals-vs-Layer-2-Metaprotocols-Part-2-The-Final-Showdown.png" height="800" width="800"> <figcaption><em>Bitcoin and</em><a target="_blank" href="https://twitter.com/Single_Use_Seal" rel="noopener"><em> </em><em>Single-Use-Seal</em></a><em> (Theme #6) are blasting off soon!</em></figcaption> </figure> <p><em>This is a guest post by Steven Hay. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.</em></p><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
